Wigan Council v Property Alliance Group Limited

For non-domestic rating, the statutory concept of the person entitled to possession requires a single, purposive inquiry. The relevant person is the one with a real and practical entitlement enabling them to occupy the property or confer occupation on another. Immediate legal entitlement is ordinarily relevant, but it is not a separate test that displaces the purposive inquiry.

Where a lease is granted to a special purpose vehicle which, because of the surrounding liquidation scheme, has no real or practical ability to exercise its rights, the vehicle is not the owner for rating purposes. The landlord remains liable. The landlord’s motive is irrelevant where the transaction is genuine. A members’ voluntary liquidation used as a shelter from rates may nevertheless constitute a misuse of insolvency legislation.

Wigan Council and Trafford Council sought recovery of national non-domestic rates from Property Alliance Group Limited in respect of unoccupied commercial properties. PAG had granted scheme leases to special purpose vehicles, which entered members’ voluntary liquidation and relied on the statutory exemption for property owned by a company being wound up voluntarily.

The claims followed the Supreme Court’s decision in Rossendale Borough Council v Hurstwood Properties (A) Ltd. PAG argued that the special purpose vehicles were the owners, that there were separate tests for ordinary and unusual cases, and that the councils’ demand notices were invalid or served late. The central questions were whether the schemes transferred ownership for rating purposes and whether the demand notices were effective.

1. Ownership test. The court applied the purposive approach in Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16. The statutory inquiry asks which person, viewed in the real-world context, has the ability to bring an unoccupied property back into use. There is one test under section 65(1) of the Local Government Finance Act 1988, not separate tests for ordinary and unusual cases.
2. Immediate legal entitlement to possession is a necessary condition in an ordinary case, as explained in Brown v City of London Corporation [1996] 1 WLR 1070, but it is not a complete test. In the unusual circumstances identified in Rossendale, the question is whether the alleged owner has a real and practical ability to exercise that legal right.
3. The special purpose vehicles had no such ability. Their only function was to enter the leases and enter liquidation. They had no resources, business purpose or genuine ability to occupy, assign or let the premises. Control of any marketing and subsequent occupation remained with PAG. The leases were genuine, but they did not transfer the statutory entitlement to possession.
4. PAG’s motive to avoid rates was legally irrelevant. The conclusion rested on statutory purpose and the facts viewed in context, not moral disapproval or a finding that the leases were shams.
5. The schemes also misused insolvency legislation. Section 91 of the Insolvency Act 1986 required liquidators to be appointed to wind up the company’s affairs and distribute its assets. Scheme 1 contemplated no appointment, while Scheme 2 selected a liquidator willing to preserve the scheme leases. The winding-up exemption was being used for a purpose for which it was not provided.
6. The demand notices were proved and had been served as soon as practicable. The councils were not told that rates-avoidance schemes were being used, and could reasonably treat the information supplied by PAG at face value. The court distinguished North Somerset District Council v Honda Motor Limited [2010] EWHC 1505 (QB) on that basis. In any event, the alleged delay caused no substantial prejudice.
7. The schemes were ineffective. PAG was in principle liable for the claimed rates, subject to the specific findings concerning individual hereditaments. The parties were invited to agree a formal order.

These were first-instance lead claims. The court recorded that numerous related claims had been stayed pending determination of three lead claims. The statutory construction issue had previously been considered by the Supreme Court in Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16; [2022] AC 690.